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Compute what is the expected profit of granting credit

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Consider the case of the Cast Iron Company. On each nondelinquent sale, Cast Iron receives revenues with a present value of $1,390 and incurs costs with a present value of $1,000. Cast Iron's costs have increased from $1,000 to $1,240. Assuming that there is no possibility of repeat orders and that the probability of successful collection from the customer is p = 0.95, answer the following.

Problem 1: What is the expected profit of granting credit? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Reference no: EM132693994

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